RPP 5-16 RPP 5-16 Penalty Guidance
This section sets out the DFSA's policy for the determination of a financial penalty ("penalty"). Such a penalty may be an administrative fine or the submission of a proposed penalty to the
FMT(or other competent tribunal or Court).
The DFSA may also refer to this section when determining an appropriate penalty in settlement agreements, including an
When determining a penalty the DFSA will consider all relevant facts and circumstances including, but not limited to, the following:(a) the DFSA's objectives;(b) the deterrent effect of the penalty on:(i)
Personsthat have committed the contraventions; and(ii) other Personsthat have committed similar contraventions;(c) the nature, seriousness and impact of the contravention the subject of the penalty including, but not limited to, consideration of the following factors:(i) the duration and frequency of the contravention;(ii) whether the contravention revealed serious or systemic weakness in the Person'smanagement, systems and controls relating to all or part of the Person'sbusiness;(iii) in market misconduct cases, the DFSA should consider whether the contravention had an adverse effect on markets and, if it did, how serious that effect was and may consider the risk to the reputation of the DIFCmarkets;(iv) the loss or risk of loss caused to consumers, investors or other market users; and(v) the nature and extent of any crime facilitated, occasioned or otherwise attributable to the contravention.(d) the extent to which the contravention was committed deliberately or recklessly including, but not limited to, consideration of the following factors:(i) in relation to an individual:(A) whether the contravention was intentional (in that the individual intended or foresaw the potential or actual consequences of his actions);(B) whether the individual has given no consideration to the consequences of the behaviour that constitutes the contravention.(C) where the individual has not followed a firm's internal procedures and/or the relevant DFSA Laws and Rules, the reasons for not doing so; and(D) where the individual has taken decisions beyond his field of skill, competence and experience, the reasons for the decisions and for their being taken by that individual;(ii) in relation to a firm:(A) whether the contravention was intentional or reckless; for example, where a firm deliberately takes a course of action when it knew the actual or potential consequences of its actions;(B) where the firm's internal procedures were intentionally designed to produce the contravention or were drafted in such a way that the contravention was probable; and(C) where the firm has acted beyond its field of competence; for example, by entering into a business line with which it has no previous experience;(e) if the contravention involved a number of Persons, the degree of involvement and specific role of each Person;(f) the benefit gained (whether direct or indirect, pecuniary or non-pecuniary) or loss avoided as a result of the contravention which is the subject of the penalty;(g) the conduct of the Personon whom the penalty is imposed following the contravention including, but not limited to, consideration of the following factors:(i) whether or not the Personbrought the contravention to the DFSA's attention (or to the attention of other regulatory authorities, where relevant);(ii) the degree of cooperation the Personshowed during the DFSA's enquiries and investigation of the contravention; and(iii) any remedial steps taken by the Personsince the contravention was identified (and whether those steps were taken at the Person'sown initiative or that of the DFSA);(h) the difficulty in detecting and investigating the contravention the subject of the penalty;(i) whether the Personcommitted the contravention the subject of the penalty in such a way as to avoid or reduce the risk that the contravention would be discovered. A Person'sincentive to commit a contravention may be greater where the contravention which is, by its nature, harder to detect. The DFSA may therefore impose a more significant penalty where it considers that a Personcommitted a contravention in such a way as to avoid or reduce the risk that the contravention would be discovered;(j) the disciplinary record and compliance history of the Personon whom the penalty is imposed including, but not limited to, consideration of the following factors:(i) whether the DFSA or any other law enforcement agency or Financial Services Regulatorhas taken any previous enforcement action against the Person;(ii) whether the Personhas previously undertaken not to do a particular act or engage in particular behaviour (for example in an Enforceable Undertakingto the DFSA); and(iii) whether the DFSA or any other law enforcement agency or Financial Services Regulatorhas previously taken supervisory action against the Person(for example by restricting the business of the Person) or has previously requested the Personto take remedial action and the extent to which that action has been taken; and(k) the financial circumstances of the Person, particularly in the case where the DFSA is considering an administrative fine, including, but not limited to a consideration of whether there is verifiable evidence of serious financial hardship or financial difficulties if the Personwere to pay the level of a financial penalty appropriate for the particular contravention.
The DFSA may take into account that natural persons may not always have the financial resources of a body corporate and that enforcement action may have a greater impact on a natural person than a body corporate.
The DFSA may consider the potential impact on a firm's financial position which may result from a proposed penalty, particularly in relation to the implications for a firm's clients and, where relevant, the firm's ability to pay restitution.